So, what is a Piggyback Loan?
A. A piggyback loan is sometimes arranged to eliminate private mortgage insurance and the necessity for a large down payment. Two loans — first and second mortgages — close simultaneously with the loans totaling the full price, yet neither loan exceeds the 80% cap. On a loan of 80/10/10, the first mortgage captures 80%, the second mortgage — or piggyback mortgage is loaned on 10% of value and the borrower has a down payment of 10%. In most cases, the interest rate on the first mortgage is calculated as if the borrower puts 20% down, and, PMI is eliminated. On a loan package of 80/15/5, the borrower will usually pay a somewhat higher interest rate on both mortgages. However, the borrower may still get a savings by eliminating PMI.
A piggyback loan is sometimes arranged to eliminate private mortgage insurance and the necessity for a large down payment. Two loans — first and second mortgages — close simultaneously with the loans totaling the full price, yet neither loan exceeds the 80% cap. On a loan of 80/10/10, the first mortgage captures 80%, the second mortgage — or piggyback mortgage is loaned on 10% of value and the borrower has a down payment of 10%. In most cases, the interest rate on the first mortgage is calculated as if the borrower puts 20% down, and, PMI is eliminated. On a loan package of 80/15/5, the borrower will usually pay a somewhat higher interest rate on both mortgages. However, the borrower may still get a savings by eliminating PMI.
A piggyback loan is sometimes arranged to eliminate private mortgage insurance and the necessity for a large down payment. Two loans — first and second mortgages — close simultaneously with the loans totaling the full price, yet neither loan exceeds the 80% cap. On a loan of 80/10/10, the first mortgage captures 80%, the second mortgage — or piggyback mortgage is loaned on 10% of value and the borrower has a down payment or equity of 10%. In most cases, the interest rate on the first mortgage is calculated as if the borrower puts 20% down, and, PMI is eliminated. On a loan package of 80/15/5, the borrower will usually pay a somewhat higher interest rate on both mortgages. However, the borrower may still get a savings by eliminating PMI.
